The Chinese renminbi, or yuan, hit a 20-year high after the People’s Bank of China (PBOC) raised the daily reference rate, strengthening the daily fixing rate by .1 percent to 6.0950 per dollar. The yuan’s appreciation came after China reported a trade balance that expanded in December, creating a $25.6 billion surplus and on the poorer than expected US jobs report.
The PBOC has created a plan to end the daily intervention within the currency market and to widen the yuan’s trading range. The PBOC is looking to make the yuan more accessible outside mainland China and used more in foreign trade. According to the PBOC Deputy Governor Yi Gnag, the Chinese central bank will release a more detailed plan on the foreign-exchange reforms.
The daily chart of USDCNH shows price action breaking through a large triangle to the downside. The pair has been trending to the downside with the speculation of a taper slowdown by the Fed accelerating the decent. A potential pullback to 6.0462 per dollar is possible. However, if the Fed does decide to continue on with additional tapering, after determining that further bond purchases add little benefit, the dollar could firm up and cause the pair to retrace.